Telangana High Court
M/S Spectrum Power Generation Limited vs M/S United India Insurance Company ... on 2 January, 2025
THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE
AND
THE HON'BLE SRI JUSTICE J.SREENIVAS RAO
COMMERICAL COURT APPEAL No.26 OF 2022
JUDGMENT:
(Per the Hon'ble Sri Justice J. Sreenivas Rao)
This appeal has been filed aggrieved by the judgment and decree
dated 05.10.2021 in C.O.S.No.134 of 2017 (old O.S.No.451 of 2008)
passed by the Special Court for trial and disposal of Commercial
Disputes at Hyderabad (hereinafter referred to as 'the Special Court')
invoking the provisions of Section 13 of the Commercial Courts Act,
2015 (hereinafter referred to as 'the Act').
2. The appellant is the plaintiff and respondents are the defendants
in C.O.S.No.134 of 2017. For the sake of convenience, the parties
herein are referred to as they arrayed in the suit before the Special
Court.
3. Heard Ms.Meenakshi Aurora, learned Senior Counsel appearing
for Mr.M.Naga Deepak, learned counsel for the appellant, and
Mr.A.Venkatesh, learned Senior Counsel appearing for Mr.Srinivas
Rao Pachwa, learned counsel for respondent Nos.1 and 2.
3. Brief facts of case:
3.1. The plaintiff - Spectrum Power Generation Limited has filed suit
in O.S.No.451 of 2008 before the III Additional Chief Judge, City Civil
Court, Hyderabad, seeking the following reliefs:
"(a) Declaring that the insurance claim comprising of material
damage and Business Interruption losses preferred by
the plaintiff relating to the Steam Turbine Generator
incident which occurred on 05.11.2002 at the facility is
admissible under the IAR Policy No.
050100/11/02/059/2002 dated 31.07.2002 pertaining
to the period from 01.07.2002 to 30.06.2003; and
consequently, direct the defendant Nos.1 to 3, to jointly
and severally pay the plaintiff the sum of
Rs.166,88,71,981/- (Rupees One hundred Sixty Six
Crores Eighty Eight Lakhs Seventy One Thousand Nine
hundred and Eighty One only) being Material Damage
loss and Business Interruption loss suffered by the
plaintiff.
(b) Direct the defendant Nos. 1 to 3 jointly and severally to
pay the plaintiff a sum of Rs.1,00,000/- as consequential
damages.
(c) Direct the defendant Nos. 1 to 3 jointly and severally to
pay pendente lite interest @ 12% p.a. or such higher rate
as this Court may decide from the date of filing of the suit
till the date of decree on the amount of Rs
166,88,71,981/-.
(d) Direct the defendants 1 to 3 to pay future interest @ 12%
p.a. or such higher rate as this Court may decide from
the date of decree till the realization of the amount.
(e) To award costs of the suit."
3.2. The said suit was transferred to the Special Court and it was
renumbered as C.O.S.No.134 of 2017. In the above said suit, it is
averred that the plaintiff Company is registered under the provisions of
the Companies Act, 1956 on 26.10.1992 and the main object is that to
generate, harness, develop, accumulate, distribute and supply
electricity by setting up thermal power plants by using liquid, gaseous
or solid fuels for the purpose of light, heat etc., The plaintiff had
entered into an Operation and Maintenance Agreement (for short, 'O &
M Agreement') on 14.03.1995 and thereafter, it had entered Amended
and Restated Power Purchase Agreement (for short, 'PPA') dated
23.01.1997 with the erstwhile Andhra Pradesh State Electricity Board
(A.P.S.E.B.) and subsequently the same was changed into Andhra
Pradesh State Transmission Corporation (APTRANSCO), for the
purpose of generating electricity from the operations of all Gas
Turbines and Steam Turbines. The plaintiff was operating 208 MW
combined gas based power station at Kakinada of Andhra Pradesh
State and the facility comprises of three Gas Turbines and one Steam
Turbine Generator (for short 'STG') and the commercial operations
were commenced on 19.04.1988. The plaintiff further averred that
defendant No.1 is the lead insurer, defendant Nos.2 and 3 are the co-
insurers, defendant No.4 is the Contractor for operation and
maintenance of the facility and defendant No.5 is the original
manufacturer of the equipment.
3.3. The plaintiff further averred that it has originally entered into an
O & M Agreement with defendant No.4 for operation of the facility on
14.03.1995 and purchased an Industrial All Risk Policy (for short 'IAR
Policy') in the joint names of the plaintiff, defendant Nos.4 and 5 for
coverage of Rs.854.24 crores. The said IAR Policy was issued on
31.03.1998 and the same was renewed from time to time till
30.06.2005. The relevant IAR Policy for the period between
01.07.2002 to 30.06.2003 is IARP No.050100/11/02/059/2002 dated
31.07.2002. In the O & M Agreement between the plaintiff and
defendant No.4, there was a condition that the plaintiff shall obtain
various insurance policies in the names of the plaintiff, defendant
Nos.4 and 5 for insurance cover for property as well as for
indemnifying against the loss of business interruption. The condition
13.2 in the O & M Agreement stipulates that the "insurance shall cover
real and personal property at the facility and the site on a 100%
replacement costs basis against all risks of direct physical loss or
damage to facility and cover shall include business interruption and
extra expense cover for loss of revenues and any additional and
continuous expenses".
3.4. The plaintiff further averred that Section I of the IAR Policy
provides for an insurance cover for the material damage to the insured
property of the facility due to accidental, physical loss, destruction or
damage for any reason other than the reasons specifically excluded
and Section II of the IAR Policy made a provision for business
interruption risks/consequential losses arising out of the shutdown of
machines/units to facilitate repairs/replacements due to the damages
caused to the facility and the causes for the same are with reference to
the causes mentioned in Section I of the IAR Policy.
3.5. The Plaintiff also averred that defendant No.4 had been
observing an abnormal increase in the Thrust Pad Temperature of the
STG for the past few weeks before 05.11.2002 and the original
equipment manufacturer i.e., defendant No.5 had recommended
defendant No.4 to conduct a detailed wear particle analysis by drawing
an oil sample from the STG and to collect the oil sample from the
nearest point of the drain point. It is also averred that a detailed
inspection was conducted by defendant No.5 and found that Rotor
Shaft of the STG and the damaged part was sent to M/s. ABB Aisthom
Works, Vadodara for repair and STG was shut down on 05.11.2002.
According to the plaintiff, repair works of the damaged Rotor Shaft
completed by M/s.ABB Aistom Works and the Rotor Shaft reached to
the plaintiff site on 23.10.2003 and finally the STG was put to operate
on full load with the grid on 17.12.2003 after gap of 13 ½ months.
3.6. The plaintiff further averred that defendant No.4 through letter
dated 06.11.2002 forwarded the report on the above incident to the
plaintiff notifying the same to the insurance company and the plaintiff
has forwarded the same to defendant No.1 with letter dated
07.11.2002. On receipt of the said communication, defendant No.1
along with Surveyor M/s. NVP Sharma Associates Private Limited
visited the site on 15.11.2002 and higher officials of defendant No.1
visited the site along with another Surveyor M/s. Mentha & Padamsay
Private Limited on 28.11.2002 and 29.11.2002. The Surveyors visited
the site on 18.12.2002 for collection of information and data relating to
the loss estimate. Accordingly, the plaintiff furnished entire
information to the Surveyors and sought for release of on account
payment pending final settlement for claims for losses caused to the
STG. On 21.01.2003 a meeting was held between the Regional
Manager of defendant No.1 and officials of the plaintiff at Hyderabad
for settlement of issue relating to on account payment and the
Regional Manager of defendant No.1 has assured the plaintiff that on
account of loss to the STG would be released shortly.
3.7. Thereafter, the plaintiff submitted several letters on 21.03.2003,
26.03.2003 and 02.05.2003 for furnishing the copy of the interim
survey report, however, defendant No.1 has not furnished the same,
on the other hand rejected the claim of the plaintiff through letters
dated 13.05.2005 and 09.11.2005. Questioning the above said
rejection letters, the plaintiff filed W.P.No.2195 of 2006 before the High
Court of Andhra Pradesh at Hyderabad. In the said writ petition, the
plaintiff sought interim direction in W.P.M.P.No.2195 of 2006 directing
defendant No.1 to furnish the interim survey report and pursuant to
the interim direction dated 07.02.2006, defendant No.1 furnished the
interim survey report dated 05.02.2003 to the plaintiff. Despite of
recommendation made in the survey report, defendant No.1 has not
made payments to the plaintiff, as such, the plaintiff addressed letters
dated 12.11.2003, 11.12.2003 and 22.01.2004. After 2½ years,
defendant No.1 rejected the insurance claim made by the plaintiff for
the damage to the STG through letter dated 13.05.2005. Thereafter,
the plaintiff addressed a letter dated 31.05.2005 to defendant No.3
seeking for views and opinion on rejection of insurance claim.
Accordingly, defendant No.3 in its letter dated 17.06.2005 opined that
IAR Policy covers all risks except those covered in the exclusions and
the unintentional errors of defendant No.4 in the course of business
are within the coverage of policy.
3.8. When defendant No.1 failed to consider the claims, the plaintiff
filed suit claiming an amount of Rs.166,88,71,981/- against defendant
Nos.1 to 3 towards its insurance claim for material damage and loss
suffered due to the business interruptions and Rs.1,00,000/- towards
consequential damages and pendente lite and post decretal interest on
the above said amount @ 12% per annum and costs.
4. Defendant No.1 filed written statement denying the averments
made by the plaintiff inter alia contending that the original insurance
policy was issued in the year 1998-99 to the plaintiff and renewed
periodically, as the sole insured, and later in terms of the O & M
Agreement dated 14.03.1995, the names of defendant Nos.4 and 5
were included as co-insured or joint injured parties. Defendant Nos.4
and 5 have no insurable interest in the subject of insurance and
defendant No.1 had issued policy after considering all the terms and
conditions of O & M Agreement and strictly subject to their rights
synchronizing with the rights of the plaintiff. It is further averred that
defendant Nos.4 and 5 are exclusively liable as per the terms and
conditions of O & M Agreement and the same was referred in the letter
dated 28.08.1998 as well as reply letter dated 09.09.1998 regarding
inclusion of names of defendant Nos.4 and 5.
4.1. It is also averred that the IAR Policy was issued in the joint
names of the plaintiff, defendant Nos.4 and 5 only basing on the
representation made by the plaintiff regarding O & M Agreement and
the same proves through correspondence. It is further averred that
admissibility of the liability under Section I of the policy, the plaintiff
will be entitled for claiming the insurance under Section II of the
policy. The right to sue for the plaintiff survives till expiry of 12
months from the date of disclaiming the liability as per the condition 5
(ii) of IAR Policy and as the disclaimer was made on 13.05.2005 by
defendant No.1, the plaintiff shall exercise the right to file the suit
within 12.05.2006, failing which it shall be considered that the
plaintiff has abandoned the claim. It is averred that as per clause 5(ii)
of the IAR Policy, even right of defendant No.4 to make any claim stood
expired after lapse of 12 months of the incident and the suit is bad for
non-joinder of financier/banker as the benefit if any payable is only to
the banker and not to the plaintiff, as per the terms of the IAR Policy.
Defendant No.1 further averred that the IAR Policy does not cover the
liability of the Contractor (defendant No.4) under O & M Agreement.
The liability arising out of wilful negligence or wilful act by the plaintiff
or anyone acting on behalf of the plaintiff is excluded from the cover
and as defendant No.4 is acting on behalf of the plaintiff, the liability
out of wilful act or wilful negligence of defendant No.4 stands
excluded.
4.2. Defendant No.1 also averred that the damage occurred due to
the wilful negligence of the employees of defendant No.4 and as such,
damage falls within the exclusion clause of the policy and therefore,
defendant No.1 is not liable to indemnify the loss. As per the terms
and conditions of O & M Agreement, any negligence on the part of
defendant No.4 will render the policy exception effective and operable
and thereby disentitle any of the insured, the right to make the claim
under the policy. Accordingly, defendant No.1 rightly rejected the
claim of the plaintiff.
4.3. Defendant No.1 further averred that in order to check the
functioning of the facility, defendant No.5 has suggested, drawing of
sample for wear particle analysis from the near point to the bearing,
contrary to the suggestion, instead of drawing sample from nearest
point of bearing, staff of the plaintiff has drawn sample from flushing
box by opening it, which resulted in splashing out of oil and the cover
of flushing box could be fixed after some time and the damage
occurred to the rotor shaft of the STG and the same is purely
negligence on the part of the staff of the plaintiff only. Defendant No.1
addressed a letter to Surveyors asking them to clarify the issues
relating to method of collection of sample and surveyors gave clean
chit to the engineers who had drawn the samples.
4.4. Defendant No.1 also averred that the observation of the
Surveyors giving clean chit to the employees of defendant No.4 is not
correct. The Surveyors in their previous reports have stated that the
wear particle analysis was carried out with the help of electronic
microscope by examining the samples drawn from purifier strainer
drain, during pre-accident and post-accident situation. The employees
of defendant No.4 are supposed to have well acquainted with all
features of the STG and the features of flushing box and velocity of
return oil in it. In the letter dated 07.11.2002, the plaintiff has not
stated anything about meeting in the morning or deliberations and
they have not given any reasons for not mentioning about the facts in
the said reporting letter and also averred that survey report dated
05.02.2003, the report given by Mr.Raju was extracted which makes it
clear that he has drawn oil sample by wilful negligent act.
4.5. Defendant No.1 also averred that as per clause 13.2.2 of the O &
M Agreement, defendant No.4 is responsible for direct physical loss or
damage to the facility and the said liability of defendant No.4 is not
subject matter of the IAR Policy. As per clause 3.2.10 of the O & M
Agreement, defendant No.4 shall adhere to all the safety precautions in
operating the facility and qualified safety representatives are to be
employed for the purpose of running the facility by taking all the
precautions.
4.6. Defendant No.1 further averred that as per 22.1 of the O & M
Agreement, defendant No.4 is not entitled to any damages which arise
out of any other contract or written agreement between the plaintiff
and third parties including erection contract and defendant No.4 being
the erection contractor, it is also debarred from making any claim.
The plaintiff has suppressed the material facts regarding the incident
in the plaint and there is no obligation to honour the insurance claim
made by the plaintiff in the absence of proper survey report, in view of
Section 64 UM (2) of the Insurance Act. The role of surveyor is only to
assess the loss and not to decide admissibility of liability. The interim
survey report is not conclusive one. Basing on the interim survey
report, the plaintiff is not entitled to make any claim against defendant
No.1, especially, the plant between 05.05.2003 to 17.12.2003 was not
in operation only on account of the failure of the repairer in properly
affecting the repair and defendant No.1 cannot be made accountable
for the same.
4.7. Defendant No.1 further averred that the property at the site was
insured, the liability of defendant No.4 under O & M Agreement is not
the subject matter of the insurance at all and nowhere in the policy, it
is stated that there is negligence on the part of the operator i.e.
defendant No.4, it is termed as a risk covered under the policy. The
loss is occurred due to non-adhering of the safety programme by
defendant No.4 as per clause 3 and 3.2.10 of the O & M Agreement.
He further stated the suit is filed beyond limitation and the same is
liable to be dismissed and also for non-joinder of banker/financier as a
party to the suit.
5. Defendant No.3 filed written statement denying the claim of the
plaintiff and also letter said to have been issued by it to the plaintiff
giving opinion on admissibility of the claim of the plaintiff. According
to defendant No.3, being a co-insurer, it has to be abide by the
decision of the lead insurer i.e. defendant No.1 and it is the
responsibility of defendant No.1 to admit or deny the claim of the
plaintiff. It is further stated that they adopted all the contentions of
the written statement of defendant No.1.
6. Defendant No.4 has supported the claim of the plaintiff under
the IAR Policy and stated that the incident is the subject matter of the
claim by the plaintiff and further stated that there is no negligence on
the part of the plaintiff or on the part of its employees in operation of
the facility and the claim of the plaintiff does not fall under any of the
exclusion clauses and the IAR Policy is an independent and separate
contract and it cannot be read in conjunction with the terms of O & M
Agreement. He further stated that the plaintiff has rightly claimed the
amount in the suit and the same is to be allowed.
7. Defendant No.5 filed written statement stating that the trial
Court has no jurisdiction to entertain the suit as the plaintiff do not
have office or carry on business within the jurisdiction of the trial
Court and the suit is liable to be dismissed on the ground of
jurisdiction alone.
8. Basing upon the pleadings of the respective parties, the trial
Court framed the following issues:
1. Whether the Plaintiff is entitled for recovery of the amount as
prayed for?
2. Whether the Plaintiff is entitled for consequential damages as
prayed for?
3. Whether the Plaintiff is entitled to pendente lite and future
Interest as claimed?
4. Whether the defendants 1 to 3 are jointly and severally liable
to pay the claims made by the plaintiff in the suit?
5. Whether the rejection of the insurance claim of the Plaintiff
under all insurance risk policy by defendant No.1 is
misconceived, improper, illegal, untenable and against the
provisions of all Insurance risk policy?
6. Whether the defendant No.1 has correctly relied on the O &
M contract for rejection of the claim of the plaintiff under the
all insurance risk policy?
7. Whether the plaintiff sought an endorsement for Including
the defendants 4 and 5 as insured in the Industrial all risk
policy, dt.31-7-2002 on account of the O & M Contract
between the plaintiff and the defendants 4 and 5?
8. Whether the plaintiff's right to sue was abandoned on
account of breach of policy condition No.5(ii) as contended by
the defendants 1 and 2?
9. Whether the suit filed by the plaintiff is maintainable in
respect of reported loss resulting operation of the machine by
the O & M contract?
10. Whether the suit filed by the plaintiff is not maintainable for
non joinder of necessary party on account of the agreed bank
clause as found in industrial all risk policy?
11. Whether the plaintiff is entitled to claim any amount on
behalf of defendant No.4, O & M Contract in view of the
clause 17.6 of the O & M contract?
12. Whether the loss caused by the plaintiff due to acts of the O
& M Contractor is covered under the industrial all risk
policy?
13. Whether the negligent and wilful acts and mal-operation of
the O&M Contractor exclude the peril under the industrial all
risk policy?
14. Whether the findings of the survey report is binding on the
defendant No.1 U/s, 64-UM of the Insurance Act?
15. To what relief?
9. On behalf of the plaintiff, PWs.1 and 2 were examined and
Exs.A.1 to A.60 documents were marked and on behalf of the
defendants, DWs.1 and 2 were examined and Exs.B.1 to B.90
documents were marked.
10. The trial Court taking into consideration the oral and
documentary evidence on record and after hearing the parties decreed
the suit in part and directed defendant No.1 (lead insurer), defendant
Nos.2 and 3 (co-insurers) to pay, in proportion to their respective
liability under the IAR Policy i.e., 70%, 10% and 20% respectively, an
amount of Rs.17,79,49,946/- with interest @ 12% per annum from
12.05.2003 till the realization of the suit debt and directed the
defendants to pay a sum of Rs.2,38,15,070/- towards costs of the suit
to the plaintiff and rest of the claim of the plaintiff is dismissed by its
judgment and decree dated 05.10.2021.
11. Aggrieved by above said judgment and decree, the plaintiff filed
the present appeal.
12. Submissions of the learned counsel for the
appellant/plaintiff:
12.1. Ms.Meenakshi Aurora, learned Senior Counsel representing Mr.
M.Naga Deepak, learned counsel for the appellant/plaintiff submitted
that the trial Court without properly appreciating the oral and
documentary evidence on record dismissed the suit and not granted
the relief in respect of the business interruption loss for the period of
407 days. She further submitted that in the interim survey
report/Ex.A.12 = Ex.B.43, it is specifically mentioned that the plaintiff
sustained Rs.24.66 crores towards business interruption loss for 105
days. In such circumstances, the trial Court ought to have decreed
the suit in toto.
12.2. Learned counsel also submitted that as per Section II of IAR
Policy, when the business carried by the insurer was interrupted
consequent to the occurrence of damage to the STG as a consequence
to the material damage under Section I of Ex.A.5 policy. The insurer is
entitled to claim amount in respect of business interruption loss. The
Court below without properly considering the conditions mentioned
under Ex.A.5 erroneously rejected the claim of the plaintiff in respect
of business interruption loss.
12.3. Learned counsel further submitted that the trial Court failed to
appreciate that the business interruption loss is a natural/obvious
consequence of material damage. Therefore, denying the claim of
business interruption loss after duly adjudicating the material damage
claim in favour of the plaintiff is contrary to the evidence on record.
She also submitted that the trial Court ought to have considered that
the steam turbine damage and its consequent shut down (material
damage), the plaintiff incurred revenue losses, as in a combined cycle
plant (comprising of Gas Turbines and Steam Turbine) electricity is
produced by the gas turbine exhaust contains lots of amount and
waste heat, which is recovered by the heat recovery steam generator.
She further submitted that the trial Court has not appreciated
Ex.A.13, wherein it is specifically mentioned that the loss of about
50% in the electricity production capacity of the plaintiff's Combined
Cycle Power Plant due to the Steam Turbine Damage and its
consequential shut down. She also submitted that basing upon the
very same material and oral documents adduced by the parties, the
trial Court decreed the suit in respect of the material damages,
however, dismissed the claim insofar as the business interruption loss
in the absence of any reasons, much less valid reasons.
12.4. Learned counsel vehemently contended that defendant Nos.1
and 2 have not placed any evidence denying the claim of the plaintiff
in respect of the business interruption loss even though the plaintiff
proved its initial burden by adducing oral and documentary evidence.
In such circumstances, the trial Court ought to have decreed the suit
in toto. She submitted that defendant Nos.1 and 2 have not filed
appeal or cross-appeal in respect of granting decree in favour of the
plaintiff for an amount of Rs.17,79,49,946/- in respect of claim of
material damage/loss along with interest and the same has become
final. She further submitted that defendant No.1 has not furnished
the survey report in spite of repeated reminders. At that stage, the
plaintiff filed W.P.No.2195 of 2006 and only pursuant to the interim
order dated 07.02.2006, defendant No.1 furnished the interim survey
report and the defendants have not taken any steps to conduct final
survey to determine the business interruption loss.
12.5. In support of the aforesaid submissions, reliance has been
placed on the decisions of the Supreme Court in M/s.Bihari Ganga
Hydro Power Ltd. v. New India Assurance Co.Ltd., 1, Uttar Bharat Hydro
Power Private Limited v. Oriental Insurance Co. Ltd. and another 2 ,
United Phosphorous Limited vs. United India Insurance Company Ltd., 3,
Wilson Home Appliances v. New India Assurance Co. Ltd. and another 4,
Sikka Papers Limited v. National Insurance Company Limited and
others 5 , Sri Venkateswara Syndicate v. Oriental Insurance Company
2020 SCC Online 1093
2022 SCC OnLine NCDRC 758
2019 SCC OnLine Bom 391
2020 SCC OnLine NCDRC 493
(2009) 7 SCC 777
Limited and another 6 , and National Insurance Company Limited v.
Hareshwar Enterprises Private Limited and others 7.
13. Submissions of learned counsel for the
defendants/respondents:
13.1. Per contra, Sri A.Venkatesh, learned Senior Counsel, submitted
that the plaintiff has not made any pleading in the plaint in respect of
business interruption loss. He further submitted that the burden lies
upon the party who approaches the Court to prove the claim by
adducing evidence. The plaintiff has not discharged the burden and
not proved the factum of sustaining business interruption loss by
adducing any evidence. In the absence of pleading/evidence, the
plaintiff is not entitled to claim any relief, much less the relief of
business interruption loss. The trial Court after considering the
contentions of the parties and after going through the oral and
documentary evidence on record rightly passed the judgment and
decree by giving cogent findings.
13.2. Learned Senior Counsel further submitted that the trial Court
has given a specific finding that mere claiming material damage loss
does not entitle the plaintiff to claim the loss due to business
interruption. The plaintiff has failed to prove the actual loss suffered
by it due to interruption in the business due to the material damage.
(2009) 8 SCC 507
(2021) 17 SCC 682
He further submitted that the interim survey report/Ex.A.12 = Ex.B.43
do not contain any details regarding the loss on account of business
interruption and the said document is not conclusive proof and basing
on the said report, the plaintiff is not entitled to claim any amount
under the business interruption loss. The trial Court rightly held that
the said document Ex.A.12 = Ex.B.43 is not a conclusive document.
13.3. He further submitted that the trial Court has given a specific
finding that the plaintiff has not filed any income tax statement and
other such statement to establish that it sustained business
interruption loss for a period of 407 days and also held that the
plaintiff has not filed any iota of evidence including income tax returns
for the previous years to prove the factum of sustaining business
interruption loss. He further submitted that the trial Court rightly
rejected the claim of the plaintiff in respect of the business
interruption loss and decreed the suit in part and there are no
grounds in the appeal filed by the plaintiff.
14. In view of the rival contentions raised by the respective parties
and material on record, the following points that emerge for
consideration in this appeal are:
(i) Whether the judgment and decree passed by the trial Court
in part for an amount of Rs.17,79,49,946/-, out of an
amount of Rs.166,88,71,981/- and dismissing the rest of the
claims is sustainable under law?
(ii) Whether the judgment and decree passed by the trial Court is
in accordance with law?
(iii) Whether the plaintiff is entitled any relief in this appeal? If
so, what relief?
Analysis :
Point Nos.(i), (ii) and (iii):
15. Admittedly, the plaintiff filed suit on 31.05.2008 against the
defendants declaring that the insurance claim comprising of material
damage and business interruption loss relating to the STG incident
which occurred on 05.11.2002 at the facility is admissible under the
IAR Policy dated 31.07.2002 pertaining to the period from 01.07.2002
to 30.06.2003 and consequently, direct defendant Nos.1 to 3 to pay a
sum of Rs.166,88,71,981/- being material damage loss and Business
Interruption loss and claiming an amount of Rs.1,00,000/- as
consequential damages along with interest @ 12% p.a. and other
reliefs. The trial Court after taking into consideration the oral and
documentary evidence adduced by the respective parties decreed the
suit in part directing defendant Nos.1 to 3 to pay an amount of
Rs.17,79,49,946/- in proportionate to their respective liability under
Ex.A.5 - IAR Policy dated 31.07.2022 with interest @ 12% p.a. from
12.05.2003 till the realization along with costs of Rs.2,38,15,070/-
and the rest of the claim of the plaintiff especially in respect of the
business interruption loss was dismissed holding that the plaintiff has
not produced any evidence that the plaintiff sustained the business
interruption loss during the said period.
16. The contention of the learned counsel for the plaintiff is that
once the trial Court has come to the conclusion that the plaintiff is
entitled to claim in respect of material damage under Ex.A.5, the trial
Court ought to have decreed the suit in respect of the business
interruption loss under the very same Ex.A.5. Mere decreeing the suit
in respect of material damage, the plaintiff is not entitled to seek the
claim under business interruption loss in the absence of establishing
the claim by producing necessary evidence, especially the burden lies
upon the plaintiff to prove the claim that the plaintiff sustained
business interruption loss for the period from 01.07.2002 to
30.06.2003.
17. It is pertinent to mention that the plaintiff relying upon the
interim survey report under Ex.A.12 dated 05.02.2003 has made claim
under the business interruption loss, especially when the defendants
are disputing the same and the said interim survey report is not final
and not a conclusive report. The plaintiff has not taken any steps
prior to institution of suit or subsequent to filing of suit for conducting
survey and submission of final survey report, on the other hand the
plaintiff filed application, vide I.A.No.1 of 2024, in the present appeal
seeking appointment of surveyor to compute the business interruption
loss after lapse of nearly more than 22 years.
18. Insofar as the contention of the learned counsel for the appellant
that pursuant to the interim surveyor report under Ex.A.12, the trial
Court ought to have directed the defendants to pay an amount of
Rs.24.66 crores is concerned, the document under Ex.A.12 itself was
disputed by defendants Nos.1 and 2 on the ground that the said
document is not conclusive proof and it is only interim survey. It is
pertinent to mention that the trial Court has given specific finding in
respect of Ex.A.12 holding that in the absence of any final survey
report, the same cannot be taken into consideration and the plaintiff is
not entitled to claim business interruption loss pursuant to the interim
survey report as the same is not conclusive one.
19. It is also pertinent to mention that the interim survey which was
conducted by the surveyor is only for limited purpose and subsequent
to that no final survey was conducted by defendant Nos.1 and 2 and
the plaintiff has not made any effort to conduct final survey or
produced any other evidence that the plaintiff sustained business
interruption loss for the period from 01.07.2002 to 30.06.2003. In
such circumstances, this Court is of the considered view that the trial
Court has rightly not considered Ex.A.12-interim survey report to
grant business interruption loss in favour of the plaintiff.
20. It is pertinent to mention that the plaintiff has addressed
Ex.A.35 and Ex.A.36 for payment of insurance for business
interruption loss. Defendant No.1 has rejected the claim of the
plaintiff under Exs.A.37 and A.38 and also not considered the
vouchers and other documents sent by the plaintiff in support of the
expenditure incurred by it on the ground of non-coverage of the IAR
Policy. According to combined statement Ex.A.27, the entire claim in
which Sl.No.8 relates to claim on account of business interruption for
Rs.101,97,57,237/-. However, the plaintiff has not placed any
evidence to support the claim on the loss of amount of business
interruption is based on Ex.A.35, Ex.A.36 and Ex.A.4 documents.
21. In Bihari Ganga Hydro Power Ltd. (supra), the National
Consumer Disputes Redress Commission citing the Supreme Court's
decisions in United India Insurance Co. Ltd. v. Pushpalaya
Printers, (2004 CTJ 421 (Supreme Court) (CP)) and a Constitution
Bench of Supreme Court in General Assurance Society Ltd. v.
Chandumull Jain ((1966) 3 SCR 500), held that commission under an
industrial all-risk insurance policy, a claim for business interruption
caused by machinery breakdown is valid even without a separate
material damage claim, provided the breakdown is indemnifiable. It is
a settled legal principle that in insurance contracts, uberrima fides
(utmost good faith) requires the assured to act in good faith and contra
proferentem rule, i.e., against the insurer. This ensures that any
ambiguity or term capable of multiple interpretations is resolved in
favor of the insured, aligning with the policy's purpose of providing
risk coverage and ensuring fairness.
22. In Uttar Bharat Hydro Power (P) Ltd. (supra), the National
Consumer Disputes Redressal Commission held that while the
complainant failed to notify the business interruption loss within the
required timeframe, the insurer's exclusion of 42 days in calculating
the business interruption loss was unjustified, as the plant had been
operational before the flood. The complainant was entitled to a
business interruption period of 77 days for loss calculation. The
principle of fair assessment in insurance contracts was emphasized,
ensuring that insured parties are compensated in alignment with the
policy's intent to indemnify reasonable losses.
23. The National Consumer Disputes Redressal Commission in
Wilson Home Appliances (supra), and the Supreme Court in Sri
Venkateswara Syndicate (supra), and Sikka Papers Ltd. (supra)
held that while insurance companies are required to appoint surveyors
for claims exceeding Rs 20,000 or more, the surveyor's report is not
binding or conclusive. It was emphasized that the survey report cannot
be disregarded without valid reasons and insurers cannot repeatedly
appoint surveyors to suit their preferences. It further held that Sikka
Papers Ltd., relying on the judgment of Supreme Court in New India
Assurance Co. Ltd. v. Pradeep Kumar ((2009) 7 SCC 787), confirmed
that the insurer may settle the claim for the loss suffered by insured at
any amount or pays to the insured an amount different from the
amount assessed by the approved surveyor. The report, therefore, is
not the final word and can be departed from by the insurer.
24. In National Insurance Co. Ltd., (supra), the Supreme Court
held that while a surveyor's report holds statutory recognition and is
essential in insurance claims, it is not sacrosanct and can be
contested by other evidence, such as an investigation report. Referring
to decision of Supreme Court in National Insurance Co. Ltd. v.
Harjeet Rice Mills (2005) 6 SCC 45, the Supreme Court further held
that insurers should be given an opportunity to present an
investigation report, especially when the nature of the incident is
disputed. The Court concluded that the surveyor's report, if credible
and addressing crucial aspects like stock loss, can serve as the
primary basis for the claim, even in the presence of a delayed
investigation report, provided it inspires confidence in the adjudicating
forum.
25. The judgments relied upon by the learned counsel for the
plaintiff are not applicable to the facts and circumstances of the case
on hand on the ground that the plaintiff failed to notify the business
interruption loss within the required timeframe and it has not
produced any documentary evidence about the business interruption
loss and the trial Court, after considering the oral and documentary
evidence and hearing the parties, passed the judgment and decree
with cogent findings in respect of each issue.
26. It is pertinent to mention that the trial Court specifically held
that the plaintiff has not adduced any evidence to prove that the
plaintiff could not supply the electricity under Power Purchase
Agreement (PPA) nor any demand made by APTRANSCO for supply and
failure to supply the electricity and further held that Ex.A.12-survey
report does not contain any details regarding the loss on account of
business interruption except only made claim under Ex.A.35 and
Ex.A.36. The trial Court further held that the above said documents
containing two papers with one table in each paper with calculations.
The first one is regarding the increase in fuel cost and in column No.13
of it, they have shown Rs.19.70 crores as the receivable amount lost
on account of STG shutdown. The another page containing another
table with calculation shows incentive amount lost for the period
between 19.04.2002 and 19.04.2023 and in column No.15 an amount
of Rs.14.89 crores was shown. The above said two sheets with
calculations are not supported by any other documents to show that
the figures mentioned in the two tables are correct and also stated that
there is no indication in the tables as to whether the amount
mentioned is in "Rupees" or "Lakhs" or "Crores". The trial Court had
inferred the amounts in the above columns as Rs.19.70 crores and
14.89 crores because of the claim made by the plaintiff and
mentioning of the very same figures in the plaint.
27. The trial Court further held that the plaintiff filed statement with
calculation of units billed and the net amount of bill from 10.11.1999
to 10.11.2003 and another table with calculation of incentives earned.
The tables of calculations annexed to Ex.A.36 are not signed and they
are not supported by any other documents and there is no information
as to who did the said compilation and the basis for the said
compilation in the calculation tables annexed to Ex.A.35 and Ex.A.36
and further held that the plaintiff is under an obligation to file proof
profit and loss statements, income tax statements and other such
statements which it has submitted to the government authorities or
taxing authorities to prove its revenue for previous years and it did not
do so. It is also held that the plaintiff did not file any audit report or at
least the documents evidencing the business transaction through
which revenue was gained and the unsigned calculation tables
annexed to Ex.A.35 and Ex.A.36 has not taken into consideration for
the purpose of determination of the loss on account of revenue and
further held that basing upon Ex.A.35 and Ex.A.36, the claim of the
plaintiff cannot be considered as proved that it sustained revenue loss.
28. It is also pertinent to mention that the trial Court by analyzing
oral and documentary evidence on record passed the impugned
judgment by giving cogent findings in respect of each issue and
decreed the suit in part. Hence, we are of the considered opinion that
the trial Court has rightly decreed the suit filed by the plaintiff for
Rs.17,79,49,946/- with interest and costs and dismissed the rest of
the claims. Accordingly, point Nos.(i), (ii) and (iii) are answered.
29. For the foregoing discussion, we are, therefore, not inclined to
disturb the findings of the trial Court. We, therefore, find no merit in
this appeal and the same is liable to be dismissed.
30. In the result, the appeal is dismissed. There shall be no order as
to costs.
Miscellaneous applications, if any pending, shall stand closed.
_______________________
ALOK ARADHE, CJ
_____________________________
J.SREENIVAS RAO, J
Date: .01.2025.
mar/pgp
